The federal government last month enjoyed the biggest monthly budget surplus since April 2008, as revenues exceeded spending by $116.5 billion, according to a report released by the Department of the Treasury. Compared to June 2012, when the deficit was $59.7 billion, spending dropped 47% to $170.1 billion and a strengthening economy caused tax revenues to grow by 10.2% to $286.6 billion.
For the first nine months of Fiscal Year 2013 (Oct. 1, 2012 to Sept. 30, 2013) the budget deficit shrank to $509.8 billion from $904.2 billion a year before. For the entire fiscal year, the Obama administration projects the deficit will drop to $759 billion, the smallest in five years.
The primary reason for the good budget news is the slowly recovering economy. June’s unemployment rate of 7.6% was down from 8.2% last year, net corporate income taxes were up by $29 billion, payments to the Treasury from Fannie Mae and Freddie Mac are on the rise, and American employers added 195,000 workers in June.
“Tax receipts are continuing to improve” and that will “persist throughout the rest of the year because the economy is doing better,” explained Thomas Simons, an economist at Jefferies LLC.
Although some would like to credit the indiscriminate spending cuts known as sequestration in narrowing the deficit, those cuts have also retarded economic growth that would have yielded more tax receipts, economists say.
-Matt Bewig
To Learn More:
U.S. Posts Widest Budget Surplus Since ’08 on Weaker Outlays (by Meera Louis, Bloomberg)
U.S. Posts Record June Budget Surplus (Wall Street Journal)
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